September 12, 2012:

BRASILIA/RIO DE JANEIRO, Sept 11 (Reuters) - Brazil's state-led oil company wants domestic fuel prices to gradually rise to match international crude oil as any sudden price hikes would hurt the country's economy, Petrobras Chief Executive Maria das Gracas Foster said on Tuesday. Petrobras' policy of setting gasoline and diesel prices based on long-term crude-oil averages rather than short-term swings has provided more profit than loss in the 2002-2010 period, helping the government control inflation, Foster said. "We don't believe that immediate fuel price parity would be healthy for the economy," Foster told a hearing of the economic affairs committee in the government's Senate. "The impact of a fuel price rise on the economy is great." Brazil's gasoline and diesel prices are more than 27 percent below world prices, according to the Brazilian Infrastructure Institute, a Rio de Janeiro energy think tank.

The disparity contributed to Petrobras' first loss in 13 years in the second quarter, which in turn reduced the company's access to cash to pay for a $237 billion five-year expansion plan, the world's largest corporate spending programme. Foster said in June that scheme, which envisions spending an average of $130 million a day through the end of 2016, would be impossible to achieve without higher fuel prices. The plan aims to more than double output to about 5.4 million barrels a day by 2020 and help make Brazil one of the world's top three oil producers. Under its fuel pricing policy, Petrobras loses money when crude prices rise, but makes those losses back by holding fuel prices steady when world crude benchmarks fall. Foster's comments to the Senate committee come less than three months after Petrobras received its first real price rise in six years and less than a month before nationwide municipal elections.

PUMP PRICE CONCERN

Previously the government helped Petrobras recoup losses without driving up service station prices by cutting taxes on wholesale fuel sales. Petrobras would sell the fuel at the same price, pocketing the amount that was previously collected in taxes. With taxes now at zero, any future rises will hit consumers at the pump. While Petrobras shares have gained about 20 percent since the June fuel hike, they remain close to four-year lows. Shares are now worth less than they were before Petrobras announced the discovery of giant new offshore reserves five years ago. Despite concerns about the company's declining revenue from fuel sales, rising costs, a declining cash position and falling output, Petrobras stock is undervalued, Foster said. She told Senators the stock should be trading at values close to those before a nearly $70 billion 2010 share sale, or about 25 percent more than on Tuesday. The company, however, needs to "work on its debt" or risk losing its investment grade bond rating, she said. Petrobras gained 2.31 percent to 21.72 reais in Sao Paulo trading on Tuesday.

PDVSA COURTED

Foster also said Venezuela's state-owned PDVSA has until November to decide if it will participate in a refinery under construction near Recife on Brazil's northeast coast. The Abreu e Lima refinery is being built with two separate refining chains, one for Petrobras's Brazilian crude and the other for heavy Venezuelan oil. PDVSA has yet to pay any of the cost of the plant. "I am saying specifically that PDVSA needs to come and be part of this refinery effectively, because this refinery was planned for two kinds of oil," Foster said. Petrobras has said the decision to build two separate processing units instead of just one was one of the reasons the cost of the refinery has soared.

PDVSA has the right to take a 40 percent stake in the refinery, which is 63 percent complete, Foster said. She added that if PDVSA misses the November deadline, Petrobras may consider changing it. The cost of the 230,000 barrel a day refinery has rocketed to as much as $20 billion when complete, sometime in 2014, from its original budget of $4.3 billion in 2008. According to Brazil's Federal Accounts Court, an independent auditor of government accounts, a separate refinery in Rio de Janeiro is nearly $700 million over budget and already three years behind schedule. 

SHALE GAS CONCERN

Foster denied that Petrobras was inflating the cost of the refineries and said the auditing court was using outdated accounting and pricing methods. She said the Abreu and Lima refinery cost explosion was the result of mistakes made in the original planning and the use of improper budget projection software. But even with the completion of five new refineries by the end of 2017 and upgrades to Petrobras' existing 12 in Brazil, the company will still be unable to meet domestic demand for fuel by 2020 and be forced to import, Foster said. She added that it would be easier to deal with the country's gasoline deficit by increasing production of sugarcane ethanol, which almost all new Brazilian cars can burn in pure form or mixed with gasoline, thanks to so-called flex-fuel technology. One of the reasons ethanol production is down is that it is more expensive to use than gasoline in nearly every one of Brazil's 27 states. Had fuel prices been allowed to rise, ethanol would have been competitive in many more, according to Unica, the country's main sugar-cane growers association. Foster also said she is concerned about U.S. shale gas output and its impact on natural gas prices. Lower U.S. gas prices are making petrochemical industries uncompetitive outside the U.S., she said.

By Reuters

September 12. 2012:

SAN FRANCISCO (AP) - A corroded pipe that failed and triggered a leak and massive fire at one of California's largest refineries had walls as thin as a penny in some areas, federal investigators said. U.S. Chemical Safety Board officials said late Tuesday that a key part of their probe into the fire at the plant in Richmond is why Chevron Corp. didn't replace the pipe during a routine inspection a year ago. The board previously found that Chevron had inspected and replaced a larger, corroded 12-inch pipe connected to the smaller one that failed Aug. 6. "We have obtained internal Chevron policies that recommend that every segment of pipe in this service should have been included in the pipe inspection program," said Don Holmstrom, lead investigator for the board. "There is no indication that this segment of pipe was inspected for thickness during the most recent" inspections. Chevron did not respond to a request for comment.

The blaze at the San Francisco Bay area facility knocked an important refinery unit offline, reducing production. Gas prices on the West Coast have surpassed $4 a gallon since the fire. In addition, smoke from the blaze sent thousands of residents to hospitals with health complaints. Local officials have moved to create more thorough air monitoring around refineries in the area along with better emergency response systems. The destroyed unit remains offline, and the company has provided no timetable for when it might be rebuilt. Parts of the failed, eight-inch pipe had thinned to 1/16 of an inch from its original thickness of 5/16 of an inch, officials said. "This represents about an 80 percent wall loss from the original design thickness," Holmstrom said. The pipe that failed dated back to the 1970s, the board said, and Chevron's own training documents said straight pipes such as the one that leaked were more susceptible to corrosion. "Understanding the decision-making around the replacement of the eight-inch pipe remains a key focus of the investigation," Holmstrom said. Engineering experts said the company should have done thorough inspections of connected pipes after it found corrosion and thinning in nearby pipes in the crude unit last year. "If you find local (pipe) wall loss, you don't just stop there, you extend the inspection further until you find out whether the rest of the pipe is safe to operate," said Ronald Haupt, a mechanical engineer and president of Pressure Piping Engineering Associates Inc.

By Keyctv.com

September 4, 2012:

Production has partially resumed at a refinery in northwestern Venezuela where an explosion last Saturday triggered a huge fire, caused significant material damage and killed at least 42 people, state oil company Petroleos de Venezuela S.A. said. The production units have started up “gradually,” a PDVSA spokesperson told Efe Friday, adding that work to get some processes up and running had started the day before. The blast, which investigators suspect was caused by a gas leak, hit the Amuay refinery in the wee hours of Aug. 25, leaving nine fuel tanks in flames, causing damage to more than 1,200 nearby homes and paralyzing work at the facility. The latest official report indicates 42 people died, eight remain missing and more than 100 required some degree of medical assistance as a result of the accident. The 645,000-barrel-per-day refinery is one of three in the Paraguana Refinery Complex, one of the world’s largest with a total refining capacity of 1 million bpd.

Oil Minister Rafael Ramirez, who also heads PDVSA, had said in recent days that the refinery shutdown would not affect fuel supplies for Venezuela or foreign markets, noting that the country has inventories of more than 4 million barrels of gasoline and other fuels, equivalent to a 10-day supply. The fire affected one of the storage areas but not the units where the different refinery processes occur. Eighteen National Guard members died in the accident at the complex, which has a base and housing for guardsmen, Vice President Elias Jaua said last weekend. The investigation being conducted by the Attorney General’s Office, the CICPC criminal investigations agency, the Sebin police intelligence agency and PDVSA specialists will “take the time needed,” Attorney General Luisa Ortega Diaz told state-run media this week. Chavez said Friday that the opposition was trying to use the tragedy to its advantage in the lead-up to the Oct. 7 presidential election.

Even before “we began recovering our dead,” the opposition “was saying it was Chavez’s fault, it was Rafael Ramirez’s fault, that Chavez should resign and of course Rafael Ramirez,” the leftist head of state said. “Because the reason was lack of maintenance or because there was a gas leak for several days and no one paid any attention,” said Chavez, who has vehemently denied any neglect on PDVSA’s part. On Monday, opposition candidate Henrique Capriles said the Amuay explosion reflected “the inefficiency and political maneuvering” of Chavez’s government. “We’re not talking about rains or a natural event, but an accident that is the consequence of something,” Capriles said. Last weekend, the general secretary of the Futpv petroleum workers union, Ivan Freites, accused the government of neglecting maintenance work in the oil industry in recent years.

By Hispanically Speaking News

September 4, 2012:

Authorities in Singapore have charged Royal Dutch Shell with safety lapses leading to a major fire last year at the Anglo-Dutch giant's 500,000 barrels-per-day refinery in the city state. Shell's Bukom refinery is its biggest plant worldwide and makes up more than a third of Singapore's capacity. The company faces a fine of up to S$500,000 ($402,000) if convicted in the case, which is to be heard by a court on Sept. 25. Singapore's Ministry of Manpower filed a charge against Shell on Aug. 31 for an offence under the Workplace Safety and Health Act for the lapses in safety, the ministry said in a statement late on Monday. Shell declined comment on the matter as the case is before the courts. "We have extended our full cooperation to the relevant authorities," a spokeswoman said on Tuesday. "Safety is a top priority for Shell. We regret this incident and are applying the lessons to avoid such an occurrence in the future." Last September, Shell shut its Bukom refinery for just over two weeks after the fire forced the oil major to declare a force majeure on sales of some oil products and on some crude purchases. This is a condition in contracts that exempts buyers or sellers from commitments in case of events that are beyond control. The blaze occurred during maintenance work on a pipeline linking a naphtha tank to a pumphouse for oil products to be mixed and blended.

Shell had allowed an open draining method to be used during the de-oiling of the pipeline, the ministry said. De-oiling removes petroleum products from inside the pipeline. The open-draining method used trays to collect naphtha flowing out of the pipeline through valves and a loosened flange joint that allowed the release of flammable vapours into the air, the ministry said. "The accumulation of such vapours created a flammable atmosphere that would easily be ignited by any ignition source," it added. The naphtha flow into the tray could also have led to the build-up of static charge, perhaps causing a spark that could then have ignited the flammable naphtha vapours. Shell had also failed to deploy portable gas monitors near the open drainage site that would have alerted workers and safety staff to dangerous levels of vapour, the ministry said.

By Reuters

September 4, 2012:

Phillips 66 reported that a leaking oil storage facility released an unknown amount of oil into the facility and surrounding area at its 247,000 barrel-per-day Alliance refinery in Belle Chasse, Louisiana, according to a filing with national pollution regulators. The incident was discovered at 1308 (local time) on Sunday, the filing said. The refinery, which was shut and without power as of August 30, had also seen flooding after storm Isaac.

By Reuters